Friday, March 20, 2009

Boo-Yah! Will Never be the Same

“What it feels like to us, and I’m speaking purely as a laymen, it feels like we are capitalizing your adventure…”

—Jon Stewart to Jim Cramer, March 12, 2009

Thus Jon Stewart drove a stake in the heart of what many serious investors refer to as “BubbleVision”, when he dismantled “Mad Money” host Jim Cramer—and, by inference, CNBC—piece by piece during last week’s now-famous Daily Show interview.

So famous, in fact, that NBC Chief Jeff Zucker felt compelled this week to dismiss Stewart’s interview as “absurd” and “completely out of line.”

But it is far from absurd and anything but out of line. We think it’s about time somebody called CNBC out for the mindless cheerleader it has become.Still, if you haven’t seen the interview for yourself, spend the twenty minutes to watch the replay, and see what you think.

We think it’s an eye-opener.

For one thing, Stewart demonstrates that, when he is not making yuks with his peers in the entertainment world who use the show to flog forgettable movies and even worse TV shows, he can be the best interviewer on television, bar none.

In less than half the air time of one “Mad Money”, Stewart picks apart Cramer’s show through the kind of logical, well thought-out, relentlessly piercing, hypocrisy-baring interview that “Sixty Minutes” is famous for but hasn’t conducted since Nixon was in the White House.

For another thing, it is Cramer, and not some lesser CNBC light, getting drilled here. You'd think he'd do better.After all, Cramer actually ran a hedge fund and made money for his investors before getting into the entertainment side of the financial world. Furthermore, he wrote what we have long considered one of the best financial books ever written—certainly the best look at what it’s like to actually be on the inside of a hedge fund (“Confessions of a Street Addict.”)

If anybody could handle a Jon Stewart, you'd think it would be a Jim Cramer. Yet he barely says a complete sentence, let alone makes a coherent point, during the entire interview.

In fact, far from landing a punch, Cramer says ‘no mas’ in a figurative sense by offering—and we are not making this up—to change his style completely.

Now, to be fair, Stewart seems to have actually prepared for the interview. He knows where he’s going, right from the start.

Not so Cramer, who strides onto the Daily Show set fresh off a Martha Stewart pie-making segment, with his shirt-sleeves rolled up and a smile on his face, and a game-plan that seems no deeper than to a) appear contrite, b) speak softly, and c) smile a lot. None of which come naturally to the man, as long time viewers know.

“Big fan of the show,” Cramer tells Stewart at the start, after taking his seat at the Daily Show desk. “But who doesn’t say that?”

“A lot of people, actually,” Stewart shoots back, under his breath, getting a laugh while simultaneously putting himself firmly in the driver's seat, Alpha-Male-wise.

Stewart then ingeniously sets up his guest by leaning towards Cramer and offering what sounds like an apology: “This was not directed at you per se,” Stewart says, of the relentlessly scathing portrayals of Cramer on his previous shows. “I just wanna let you know that.”

No, and D-Day was not directed at Hitler, per se.

Cramer, however, takes the bait: he smiles, shrugs, and lets his defenses down. This will be his first mistake, his second mistake, and his third, too, for it allows Stewart to then lay out the central premise of what he perceives to be CNBC’s main problem, without any rebuttal from Cramer.

The problem with CNBC, Stewart says, is “The gap between what CNBC advertises itself and what it is.”

To make his point he shows an “In Cramer We Trust” promotional clip for Mad Money, with an authoritative, God-like voice intoning:“When you don’t know what to do, don’t panic. You’ve got Cramer at your back.”

“Look,” Stewart says, letting the farcical nature of that statement sink in to Stewart’s audience and Cramer as well—after all, most of Cramer’s boo-yah types probably lost as much of their 401ks as everyone else in America—“We’re both snake oil salesmen to a certain extent, but we do label the show here as ‘snake oil,’…isn’t there a problem selling snake oil as vitamin tonic?”

“We all should have seen it more,” Cramer says contritely. “I don’t think anyone should be spared in this environment.” He concludes with a shrug. “We’ve made some mistakes…we’ve got 17 hours of live TV to do— ”“Maybe you could cut down on that,” Stewart says quietly, stopping Cramer in his tracks and bringing down the house.

The Lightening Round this is not.

With Cramer momentarily speechless, Stewart moves in for the kill, calling up clips of Cramer’s infamous 2006 Street.com interview in which Cramer discusses, in very plain language, how to manipulate markets:

“You know a lot of times when I was short,” Cramer says on the video, “I would create a level of activity beforehand that could drive the futures, it doesn’t take much money….”

“What does that mean?” Stewart asks when the clip ends.

Cramer, shoulders hunched, tight smile on his face, says, “Okay, this is a hyperbolic example…I didn’t do this, I’m trying to explain this—”

Stewart says nothing to Cramer, but quickly calls for the next video clip from that same interview. It shows Cramer putting on his most egomaniacal face and sniffing to the interviewer,“I would encourage anyone who’s in the hedge fund business to do it because it is legal, and it is a very quick way to make money, and very satisfying. By the way, no one else in the world would admit this, but I could care.”

Stewart lets the arrogance sink in, then says, “I want the Jim Cramer on CNBC to protect me from that Jim Cramer.”

And he’s still not even halfway through the interview.

What else could Cramer have done, you might ask?

Well, for starters he could have pointed out that the show is called “Mad Money” and not “How to Secure Your Financial Situation for Life.”

He could have pointed out that the show grew out of a radio program in which small investors called in questions; that he began to get a tremendous response from investors who wanted to take more control of their finances; and things took off from there.

He could have pointed out that his show was simply feeding a market that already existed, not forcing something down people's throats.

He could have pointed out that the whole idea of a TV show called “Mad Money” was exactly that: a fun way to help investors make some “Mad Money” in stocks. Not to uncover fraud at Fannie Mae or AIG or Lehman Brothers.

He could have pointed out that, being an ex-hedge fund guy, he was helping educate his viewers as to what actually makes stocks move, what to look for when trying to evaluate companies in different industries, and how to do their own homework on those companies.

Cramer could have said right up front that he never pretended to be Suze Orman or Ralph Nader, for that matter: that he simply tried to make the stock market understandable and maybe even fun, before he and his bull-market pals got blind-sided by the worst stock market since 1937.

But he did not. Cramer never had a plan.

Besides, Stewart’s larger criticism of CNBC is right on target, and hard to rebut:

“You talk about the regulators, why not the financial news networks?” Stewart says, summing up his main beef. “That’s the whole point of this. CNBC could be an incredibly powerful tool of illumination for people that [sic] believe that there are two markets—one that has been sold to us as long term, put your money in 401ks…then there’s this other market, this real market…and it hurts that long term market. … What it feels like to us, and I’m speaking purely as a laymen, it feels like we are capitalizing your adventure… It is a game you know is going on, but that you go on television as a financial network and pretend isn’t happening.”

Stewart is right: CNBC could be a powerful tool of illumination, rather than a testosterone-charged reflection of The Market itself.And Cramer, who lately seems hell-bent on blaming the financial crisis on a laughably delusional 'conspiracy' among naked short-sellers, which simply does not exist, rather than five solid years of really really really bad lending practices by AIG, Countrywide Credit, Citigroup, Fannie Mae, Freddie Mac, Merrill, Lehman, Wachovia, and, oh, yes, GE, which happens to be the parent company of CNBC, has no response to it.

Instead, he simply gives in.“How about if I try it?” Cramer blurts out, half way through the interview.Stewart looks taken aback momentarily, while his guest, a man who normally dismisses his critics by ripping heads off of plastic bears and punching the cry-baby button, offers to throw out the manic-depressive Mad Money Playbook and adopt the Jon Stewart Illumination Model.“I’ll try it. I’ll try it,” Cramer insists.

The content contained in this blog represents the opinions of Mr. Matthews.Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. This commentary in no way constitutes investment advice. It should never be relied on in making an investment decision, ever. Nor are these comments meant to be a solicitation of business in any way: such inquiries will not be responded to. This content is intended solely for the entertainment of the reader, and the author.

18 comments:

So who will hold Jon Stewart to account? Both he and Cramer wrap their acts in disclaimers which their audiences ignore and which they clearly don't believe. At their best, both are capable of piercing through the noise better than any of their peers. Using the Daily Show as a primary news source is as foolish as trading on Cramer's mood swings, but it seems many people do--because despite themselves, Stewart and Cramer obviously believe their own bs. Is a comedy show some kind of invisible cloaking device? Or in a couple of years, will people ask (for instance) why the Stewart wasn't sharper during the Presidential campaign?

The other points to mention would be Rick Santelli's attack on the "losers" who are being foreclosed and then his cancelled appearance on Stewart's show. The articles in the NYTimes, comments by Press Secretary, and the President about CNBC.

The hard part is that the criticism is completely valid. There has been no, zero, zip, nada defense of the network by its executives or an explanation of their actions. I would have thought a good start would have been to eliminate Mad Money from their lineup.

The network has decided to be part of the problem, rather than a part of the solution for the current environment.

I am watching very little of the network as compared to the pre-election period. Only when individuals act will there be change.

It was nice to finally see someone in the (not-so-mainstream) media take Cramer to task for his failings. If you'd like to see more details of Cramer being taken to the woodshed, search "Don Harrold" on YouTube. This guy has been taking Cramer to task for the past 2 years for his flip-flopping, badly missed calls, and outright deception. It's worth the time to review the vids.

And when Stewart asked who is CNBC beholden to, and whether it was to the big Wall St. types or to the common investor, I felt Cramer should have come clean and said they not beholden to either. Instead as a television network they are beholden to getting as large a rating as they can that gets to most advertising dollars so they can earn the most money for their shareholders. And to do this, if it required them to tell the public what they think they wanted to hear, they would unfortunately do it.

“I would encourage anyone who’s in the hedge fund business to do it because it is legal, and it is a very quick way to make money, and very satisfying. By the way, no one else in the world would admit this, but I could care...Stewart lets the arrogance sink in, then says, “I want the Jim Cramer on CNBC to protect me from that Jim Cramer.”

First of all, Cramer hates the SEC because they are incompetent and don't have the backs of cramer's viewers (individual investors). Read any of his columns about the incompetence of chris cox and you will immediately understand this. the SEC clearly caters to large hedge funds and ib's (madoff? pequot? lehman?). Cramer talked about manipulation, not because he thinks its right, rather, he wanted to make the SEC sound like dummies or at least incense them enough to prove cramer wrong...he made it sound like the people who are supposed to be regulating this stuff, obviously aren't doing their jobs b/c its easy. his urging of the hedge funds to do this was an even more pointed shot at finra/sec, as he explicitly laid out a manipulation scheme...hoping that they would actually investigate these types of funds. they, obviously, never did, and therefore cramers brilliant point (that the sec has been an enabler in helping hedgies screw individual) was proven true. But the point was lost on stewart and every other non-rigorous, couch-potato/blogger.

I agree to all you say.. wud say there is one part that I think stewart has it wrong... he thinks it was leverage and leverage only that killed the system.. i think it was leverage and lack of accountability.. on the part of the CEO's of the firm, rating agencies and very importantly the home owners who were massively leveraged themselves. These are the guys who brought everyone to this mess and now they want to point finger at the Wall Street alone. Agreed that wall street try to make fast money and loaded up on risk but they are not the only ones responsible for this mess... why are the homeowners being let free.. why should they retain the houses they bought with savers money ass their own?? I would definitely like to know the counter argument to that.. Why should we the savers give the leverage homeowners houses for free? Should they not earn it ?

Maybe you're assuming that since the SEC hasn't come up with anything that that means it doesn't actually occur and is just a bunch of make-believe. If thats the case, i've got a bridge i want to sell to you.

The SEC should be doing everything in its power to engender confidence in the markets. They are failing miserably (lehman, madoff, pequot, stanford)

"Then explain why most hedge funds lost money last year, if they were in on the "scheme.""

Who cares if they made or lost money? The point is, there is plenty of intent to distort markets, which is devastating to confidence. If a bank robber tries to rob a bank with no money in the vault, its still a crime. and if it happens enough, people stop using that bank or banks all together.

"please identify how much money is managed in long-only funds, versus short-only funds."

irrelvant. any type of fund can distort markets. short, long, hybrid, you name it. the point is, i have no faith that anybody is doing anything concerted enough to let the markets function normally.

Just because anonymous doesn't provide evidence of a specific name who manipulates the market doesn't logically mean such distortions don't exist.

Although I tend to agree with Jeff for the most part. There are so many huge arb desks, traders, and hedge funds that any one participant is likely to have no effect on the market for any lasting period, unless they use CNBC (cough cough cramer) to disseminate false rumors. Market oddities might be able to turn a profit once or twice for a firm before some other player recognizes something fishy and blows up the manipulative practice for the original crook.

I am a believer that Pimco bullies favorable policies after they are positioned to profit handsomely from 'em though. whatever Pimco is taking a large position is will likely get favorable government action since Pimco can hold large segments of the bond market hostage.

While I thoroughly enjoyed Stewart slaughtering Cramer into Jimmy Dean sausage, I couldn't imagine that Stewart has ever really watched an episode.

The original video montage that kicked off the controversy primarily aimed at Rick Santelli as well who tends to be the token voice of rationality and sophistication on CNBC.

Congrats on a solid post! You are one of the few who got to the heart of this matter: Why did Cramer go on the show in the first place, and why did he fail so miserably to rebut Stewart?

My jaw dropped when Cramer agreed, right at the start, that Santelli's rant was a criticism of those who are losing their homes.

Cramer should have responded that Santelli was not cruelly pursuing those people, but was instead addressing an issue called "moral hazard" and the real point of the rant was to be quite effective in criticizing an Obama policy, and by the way when is the last time that the NBC Nightly News (or for that matter the Daily Show) actually did that?

Had Cramer been on his game, he could have effectively rebutted every single thing that Stewart said during that interview. (Here's an idea: It would be so easy to go through the Stewart/Cramer video and create sound rebuttals to every point that Stewart made, and splice them into the original video.)

But in the end, going on the show was a fool's errand. Stewart has the ability to pick through a million hours of CNBC air time in order to pull out a few choice clips.

In the end, I think Stewart achieved the greater goal, which was to discredit, and perhaps even silence, critics of the administration.

At the very start of the Santelli controversy, the White House plan, clearly stated, was to establish itself as the sole source of sound policy, and to paint anything coming out of CNBC as not credible.

A) I'd argue that Charlie Rose is ten times the interviewer Jon Stewart is, but Stewart is pretty good at exposing the hyprocrisy of certain guests in a snarky sort of way.

B) One of Cramer's trite and hackneyed phrases is, "There's always a bull market somewhere." If Cramer really wanted to do his viewers a favor, he'd point out where the bull market is right now so investors can get to work making back some of the money they've lost over the past year and a half.

C) There really is no defending Cramer, as he is nothing more than a clown without the outlandish costumes or the bulbous red nose. I feel he's a charlatan who proclaims (screams) his expertise in financial matters, when his results have shown nothing of the sort for his viewers.

I have been a housing bear since about 2005; I have been fearing the economic collapse we are in since about the same time. Since then, I have watched a lot of CNBC, and read the WSJ, the Washington Post, and the New York Times, as well as a lot of financial blogs. Of the mainstream media sources I use, the only source that exposed me to more contrarian/bearish viewpoints than CNBC was Bloomberg. Could CNBC have been better? Absolutely. I never watched Cramer's show, or any of the primetime shows other than Kudlow, so I can't make any claims about the value of those shows; but I have to say I believe that CNBC is taking more criticism over their behavior the last few years than they deserve. Where were the major media? How did WSJ, WP, and NYT so completely miss what was happening? I'd say the utter failure of the newspaper industry to report on this story before it happened is a big part of its imminent demise. The economic blogs have completely wiped the floor with them, and made them irrelevant.

It's funny that CNBC, during the crash last year and since, has changed from "Bubblevision" to putting on shows asking "Is your money safe." It seems that all CNBC tends to do is to help psychologically compound the current trend in the market, in recent cases being panic.

While I think your post is a good one, I wonder if going after the cartoonish CNBC is really worth Stewart's time. While it is easy and popular to blame CNBC, or hedge funds, or the banks for the current crisis (and they clearly should share some of the blame), perhaps someone should focus the media's efforts on the incompetence of politicians and bureaucrats, past and present. Someone should question the irony of frauds like Christopher Dodd and bubble-blowers Barney Frank going after these AIG guys. Someone (in the mass media) should expose Greenspan for his role in this and the Fed for using the same solution now as it did in 2002 that got us into this. Someone should expose the fact that the "American Reinvestment and Recovery Act" is an unsustainable ponzy scheme that appears similar to the fraud committed by Madoff, in that we're either going to borrow or print our way into spending on failed social programs for which we'll have nothing to show for. When these idiot politicans grandstand and go after bankers and companies they shouldn't be bailing out in the first place, perhaps someone should question the messenger. Yet the media just reports what is being said and preys that this status quo, kick the can down the road attitude, is somehow the right thing to do.

I'm amazed to see so many defenders of Cramer here (or anywhere). When I watch CNBC I do it with the same mindset that Jon Stewart is coming from. CNBC is a useful tool (and Cramer is certainly a useful tool) for finding out what perceptions/memes that the financial establish is trying to put out there. CNBC has value only if you see it for what it really is. Cramer exists for several reasons: fools demand his "expertise", markets require the liquidity generated by fools, Goldman needs a go-to guy in the media, and he serves as a conduit for memes that various insiders want pushed.